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Updated 12/09/2005

The Contra War and the Iran-Contra Scandal

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Fearing that Nicaragua’s new Sandinista government, with the help of Cuba and the Soviet Union, would export Marxist revolution to all of Central America, the Reagan administration waged a proxy war against the Sandinistas. In November 1981 Washington authorized the CIA to spend $19.5 million to build the Contra paramilitary force, armed opponents of the Sandinista regime composed primarily of former national guardsmen of the military dictatorship that the Sandinistas had overthrown. The agency, with the help of Argentine agents, set up training camps throughout Honduras and provided food, clothing, arms and supervision for the Contras. By the mid-1980s, the Contras had established a 200-square-mile camp near the Nicaraguan border, complete with target ranges, health clinics and amenities for the rebels and their families.  Originally charged with the mission of intercepting the flow of arms from Nicaragua to leftist insurgents in El Salvador, the Contras were soon conducting acts of sabotage across the border in Nicaragua.

The Democratic-controlled U.S. House of Representatives, which mostly opposed the administration’s anti-Sandinista policies, questioned what the Contra raids in Nicaragua had to do with stopping the arms flow to El Salvador and began imposing controls on Contra support. In 1982, House Intelligence Committee Chairman Edward P. Boland introduced an amendment to the fiscal year 1983 Defense Appropriations Bill that limited U.S. financial aid for the Contras. This first of a series of Boland amendments prohibited the CIA from spending any money “for the purpose of overthrowing the government of Nicaragua.” Still concerned about the administration’s support of the Contras, Congress limited all Contra aid for fiscal year 1984 to $24 million.

Meanwhile, in Nicaragua, the Ortega government had softened its hard-line controls on the state and offered some military concessions to the United States. Dismissing this as propaganda and ignoring the intent of the Boland Amendment, the Reagan administration persisted in its efforts to keep the Contra force alive. While the hands of the CIA were fiscally tied by the Boland Amendment, staff at the National Security Council, a White House advisory body whose scope of operations until then had been domestic, became the masterminds for continuing Contra support. Lt. Col. Oliver North, aid to National Security Adviser Robert McFarlane, took charge of the operation, which sought secret funding from private American sources and other countries and channeled it into Contra hands.

In early 1984 it was revealed that the CIA had taken part in the mining of the Nicaraguan harbors without adequate notification to Congress. (In 1986 the Nicaraguan government brought this case before the International Court of Justice, which ruled the laying of landmines by the CIA illegal.) Public disapproval grew and Congress withdrew all support for Reagan’s Contra policy. In October 1984, Congress passed a tougher version of the Boland Amendment that prohibited the CIA, the Defense Department or any other U.S. agency involved in intelligence activities from providing any support to military and paramilitary operations in Nicaragua. The CIA and Defense Department were forced to withdraw large numbers of personnel from Central America. North and the National Security Council, however, continued to secretly collect and divert funding to the Contras, and the Contras increasingly turned to them for guidance.

In 1985 government officials including McFarlane and North became involved in a plan to secretly sell missiles to Iran in exchange for the release of seven Americans held hostage by Iranian sympathizers in Lebanon, with the aim of moving Iranian foreign policy in a pro-Western direction. Israel initially served as an intermediary in the arms shipments. Although this plan violated the Arms Export Control Act, an arms embargo against Iran, and the U.S. policy of not dealing with governments that supported international terrorism, Reagan authorized McFarlane to proceed with the arms sales. Profits from the sale exceeded expectations, and in 1986 North developed a plan to divert millions of dollars to fund the Contras, a move approved by McFarlane’s successor John Poindexter.

In October 1986 a Sandinista fighter shot down a cargo plane over the Nicaraguan jungle. An American on board who parachuted into Sandinista hands revealed the plane was part of a U.S.-led Contra arms supply operation, which directly violated the Boland Amendment. The president told the public that U.S. government had no connection with downed plane; Assistant Secretary of State for Inter-American Affairs Elliott Abrams and other officials gave similar assurances to Congress. A month later, the Lebanese newspaper Al-Shiraa exposed the secret arms deal with Iran. Poindexter resigned and North was fired. President Reagan acknowledged that he knew about the missile shipments, but insisted this was not an arms-for-hostages trade. Shortly thereafter the Justice Department announced its discovery that some of the proceeds from the arms sale had been diverted to the Contras.

In December an independent counsel headed by Lawrence Walsh was appointed to investigate the activities and prosecute any alleged crimes. A congressional committee and a presidential commission also launched inquiries and filed reports on the affair. North and others managed to shred or smuggle out important documents before investigations proceeded. The congressional committee’s investigation included 11 weeks of public hearings; North and Poindexter testified under a grant of immunity in July 1987. In the televised hearings, North turned from “fall guy” to “folk hero,” and his spin on the Contra operation might have saved the presidency. “I saw that idea, of using the Ayatollah Khomeini’s money to support the Nicaraguan freedom fighters as a good one,” North said in his testimony.

The independent counsel began its seven-year investigation in December 1986; 14 people were ultimately charged with criminal violations, including North, MacFarlane, Poindexter and Abrams. North was convicted of destroying documents, accepting illegal gratuity and aiding in the obstruction of Congress; Poindexter was convicted of conspiracy, false statements, destroying records and obstructing Congress; MacFarlane pleaded guilty to withholding information from Congress; and Abrams pleaded guilty to withholding evidence from Congress about secret government support of the Contras. North and Poindexter were originally sentenced to prison terms, but their convictions were reversed on appeal and the cases ultimately dismissed because of their immunity agreements with Congress. Abrams and MacFarlane were sentenced to probation, fines and community service, but President Bush pardoned them and four others shortly after his electoral defeat in 1992.

The independent counsel never proved that President Reagan had authorized the funds diversion to the Contras, and Vice President George Bush managed to avoid a thorough investigation. However, it did conclude that the sale of arms to Iran violated U.S. government policy and possibly the Arms Export Control Act, that support of the Contras violated the Boland Amendment, and that policies behind both operations were “fully reviewed and developed at the highest levels of the Reagan Administration.” It also found that following the public revelation of the operations, Regan administration officials “deliberately deceived” Congress and the public about the extent of the administration’s knowledge and support.

The legacy of the Iran-Contra affair lingers today in the current Bush administration. Since taking office in 2001, President Bush has selected several veterans of the Iran-Contra scandal to fill important posts. Read more.

For more information

“The Truth is Stranger than Fiction: The Iran-Contra Affair in a Nutshell.” Anna Burns.

“A Very Thin Line: The Iran-Contra Affairs.” Theodore Draper. Hill and Wang, New York 1991.

“Report of the Congressional Committees Investigating the Iran-Contra Affair.” Lee Hamilton and  Daniel Inouye. Washington, D.C. 1987.

“Inside Central America: Its People, Politics and History.” Clifford Krauss. Summit Books, New York 1991.

“Final Report of the Independent Counsel for Iran-Contra Matters:

Vol. I. Investigations and Prosecutions.” Lawrence Walsh. Washington, D.C. 1993.

“Firewall: The Iran-Contra Conspiracy and Cover Up.” Lawrence Walsh. WW Norton & Company 1998.

“The Iran-Contra Affair.” Julie Wolf. PBS Online: People and Events.

“Scandal? What Scandal? Bush’s Iran-Contra appointees are barely a story.” Terry J. Allen. Extra! September/October 2001.